The pace of growth in medical costs eased significantly in 2003, but still bounded well ahead of economic expansion, making it among the biggest burdens facing corporate America, a report released Wednesday said.

A sharp slowdown in prescription drug spending growth offset by a steep rise in hospital prices fueled a jump in underlying medical costs of 7.4 percent, well below the 9.6 percent rise recorded in 2002, the study by the non-profit Center for Studying Health System Change found.

The report analyzed health care revenues to hospitals, doctors and for prescription drugs for privately insured individuals, compiled by research group Milliman USA for 2003.

Medical care costs continue to soar at more than double the rate of overall price inflation, with most of the costs borne by big employers and the federal government.

“I hate to hear the word 'slowdown’ because it makes people think things are better,” said Helen Darling, president of the National Business Group on Health, whose members include Fortune 500 companies like Cisco Systems Inc. and Xerox Corp. that lobby on health cost issues.

“Nothing else in our businesses or the economy grows at this rate.”

Underlying medical cost trends are critical because they drive health insurance premiums, which rose by 13.9 percent in 2003, according to the Kaiser Family Foundation.

The United States spends twice as much on health care per capita compared to other rich countries. Health care spending is expected to comprise 18.4 percent of the gross domestic product over the next decade, up from 14.9 percent in 2002, government data show.